Agriculture could be the next sexy thing to attract investors.
“There are many billions of dollars that have come to the market in the last three years and there is a lot of activity,” said Armand Lavoie of the Kirchner Private Capital Group, a North American investor group focusing on small and medium enterprises with expertise in the agricultural sector.
Much of the investment is looking at new technologies and ways to support sustainable agriculture. However, there are challenges in Canada, said a group of panelists during a workshop on agri-investment in Calgary Nov. 17.
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The entrepreneurial spirit is willing but there is often no connection among producers in the value chain even though all participants need to share the risk and the cost of the final product, said Dale Kaliel of Alberta Agriculture.
Lori Ell, chief executive officer of Agristar, an Alberta fresh and dehydrated potato company, said there is also distrust among producers supplying processing companies. Everyone in the value chain must accept it takes time to return a profit to all participants, she said.
“I can’t guarantee you a certain amount of profit because I can’t guarantee myself a profit, but I can sell more,” she said.
Canada has a good investment environment and a favourable tax structure but there are challenges, such as interprovincial trade barriers that prohibit some raw products from crossing borders, she said.
“I procure as many potatoes as I can in Alberta … but there are times when I cannot access potatoes and I need to go either east or west or south of me to find potatoes,” she said. That requires a ministerial exemption to bring potatoes to the Vauxhall plant.
Her research has found these barriers cost Canada $8 billion a year.
Delays caused by the barriers sometimes mean competitors from other countries are able to move into what were previously secure markets.
Still, new agricultural based companies should not be deterred because investors are emerging from the private sector, corporations, government, banks and venture capital enterprises, said Mark Carlson, vice-president of investments for AVAC, an early stage investor in technology and innovation.
The organization has invested nearly a half billion dollars since it started in 1997.
“Ultimately capital has to flow to those innovations that provide the best investment opportunity for larger capital and leverage that into the marketplace as sales and shareholder value,” he said.
AVAC also helps companies find partners and grants to match investment money.
Included in AVAC’s portfolio are companies including:
• Carbon Solutions Inc., which produces activated carbon filtration systems for hog barns, chicken farms, and other livestock ammonia scrubbing activities.
• Ceapro Inc., which uses natural products to create shampoos, cleansers, moisturizers and cosmetics.
• Kinnikinnick Foods Inc., a manufacturing firm that specializes in the production of gluten free/dairy free items for customers with celiac disease or those affected by autistic spectrum disorders or other allergy conditions.
• Peak Swine Genetics Inc., a Canadian supplier of purebred and crossbred breeding gilts and boars that are sold to commercial pig producers in Canada and the U.S. Pacific Northwest.
On a broader scale, investors are looking at companies that address long-term trends like feeding a growing world population, changing consumer demands for healthier products or ways to increase agricultural production on reduced acres with restricted water supplies, said Lavoie.
Clean technology companies have sprung up to invest in biopesticides, fertilizer, solar energy and biofuel. On the Canadian side, clean tech investment funds are in the $10 million to $50 million range while in the U.S. these are considerably larger.
“There is a lot of interest from clean tech funds to invest in the agriculture industry but you really need to understand who they are, but more so what they need is to see your story,” he said.
